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30-May-2013

Morning Matters

WHAT’S INSIDE

On The Platter

BTS Group Holding (BTS TB; FV THB10.15 – Trading Buy) Company Update: A Smooth Ride Ahead BTS’ commitment to distribute at least THB21bn in dividends (which is a yield of >6%) over the next three years should be an attractive value proposition for investors, even if some may switch to BTSGIF for a direct exposure to the mass transit business. We maintain a TRADING BUY call on the stock, with an unchanged SOP-based TP of THB10.15.

Bank Sector (BANK – Overweight) Sector Update : No Sw eat From Policy Rate Cut As expected, after keeping the policy rate steady over the previous four meetings, the Bank of Thailand (BoT) trimmed it by 25 bps to 2.50% yesterday. The policy rate has dropped by a cumulative 100bps since Oct 2011. The rationale for the decision was: i) the weaker-than-expected global economic recovery, ii) tepid domestic demand growth in 1Q13, and iii) it was a tool to moderate the strong appreciation of the baht from persistent capital inflows.

MEDIA HIGHLIGHTS

♦ True mulls infrastructure fund based on 3G network

♦ SCG restructures portfolio

♦ Commercial lenders set to follow central bank on cut

♦ Diesel tax to be levied in October: Tanusak

♦ BBL in push for debit chip card

♦ Settapong quells nerves over digital TV auction

ECONOMIC HIGHLIGHTS

♦ Thailand: Unified MPC cuts rate to 2.50%

♦ Myanmar: May Attract USD100bn in FDI by 2030, McKinsey says

♦ South Korea: Industrial Output +0.8% In April

♦ BRIC: Brazil economy unexpectedly slows as prices hit consumers

♦ Global: OECD forecasts global economy to recover next year

♦ EU: German unemployment climbs four times forecast amid crisis

♦ EU: Inflation rate rose in May from lowest in 2.5 years

♦ UK: BOE targets June to complete review of banks’ capital raising

SET Intra -Day Graph

Source: Bloomberg

Key Market Indices (29 May 2013)

Value Chg % Chg % YTD SET 1601.61 -17.96 -1.1% 15.1%

SET50 1058.59 -13.98 -1.3% 12.0%

SET100 2364.20 -29.57 -1.2% 13.7%

Dow Jones 15302.80 -106.59 -0.7% 16.8%

S&P500 1648.36 -11.70 -0.7% 15.6%

Nasdaq 3467.52 -21.37 -0.6% 14.8%

FTSE 6627.17 -134.84 -2.0% 12.4%

FSSTI 3367.47 -38.61 -1.1% 6.3%

Hang Seng 22554.93 -369.32 -1.6% -0.5%

Nikkei 13929.04 -520.59 -3.6% 33.9%

KLCI 1783.47 7.31 0.4% 5.6%

SHANGHAI SE 2324.02 2.70 0.1% 2.4%

JCI 5200.69 24.46 0.5% 20.5%

SET 5-yr avg 2012 2013F

PE (x) 14.5 18.3 14.7

P/BV(x) 1.9 2.6 2.4

Yield(%) 4.0 2.7 3.1

Key Statistics

SET Value by investor Type: Daily Buy (THBm) Sell (THBm) Net (THBm) Institution 8,161.52 3,615.75 4,545.77 Proprietary 8,024.76 10,473.07 -2,448.31 Foreign 10,151.23 14,696.14 -4,544.90 Retail 34,919.09 32,471.65 2,447.45 SET Value by investor Type MTD (THBm) YTD (THBm) Institution 3,510.17 41,759.02 Proprietary -1,226.30 -2,700.24 Foreign -1,662.87 -17,607.77 Retail -621.00 -21,451.01 SET50 Index Future Long Short Net MTD YTD Institution 12,066 10,375 1,691 603 6,743 Foreign 5,211 4,914 297 -4,752 -11,908

Local 17,392 19,380 -1,988 4,149 5,165

See import ant disclosu res at the end of this report 2

Media Highlights

True mulls infrastructure fund based on 3G network The SET-listed True Corporation Plc will likely set up an infrastructure fund this year to strengthen its financial position. The third-generation (3G) mobile service network on the 850-megahertz spectrum is expected to be the underlying asset of the fund. Chief executive Suphachai Chearavanont said True's financial team is studying the value of such an infrastructure fund and the asset network, which will be sold to the fund. The company's 3G network uses 13,000 base stations nationwide, with the number set to increase to 14,000 by year-end. "The fund will likely invest in the network asset, not in the concession," he said. Mr Suphachai said True will spend another THB15bn on network expansion for both 3G and 4G on the 2.1-gigahertz spectrum this year. (Bangkok Post) SCG restructures por tfolio Siam Cement Group (SCG), Asean's leading industrial conglomerate, restructured its assets in sanitaryware and fittings businesses, which are primarily owned by SCG and the Toto Group of Japan. The adjustment is aimed at increasing SCG's management capability and flexibility to sustain business expansion in the future and drive SCG brands globally. Kan Trakulhoon, SCG's president and chief executive, said the board of directors approved the portfolio adjustment by transferring all shares in Siam Sanitary Ware Co (SSW) and Siam Sanitary Fittings Co (SSF) from Toto Group. Valued at THB2.6bn, SCG's stakes in SSW and SSF will increase to 71.4% from 35.7% and 90.6% from 44.8%, respectively. (The Nation) Commercial lenders set to follow central bank on cu t

Commercial banks are expected to reduce interest rates in the next few days, after the Bank of Thailand lowered the policy rate by 25 basis points to prop up the economy. Chartsiri Sophonpanich, president of Bangkok Bank, said it was considering cutting interest rates on both deposits and lending within the next few days. Kannikar Chalitaporn, president of Siam Commercial Bank, agreed with Kittiratt that the cut by 0.25 percentage point was not much and would not result in any significant change. The reduction is appropriate, however, and should help slow some capital flows into the country. The MPC's move has narrowed the gap between foreign interest rates and Thailand's somewhat, though at 2.50 per cent, foreign investors will still be able to benefit from the gap. (The Nation) Diesel tax to be levied in October: Tanusak Deputy Finance Minister Tanusak Lek-uthai hinted that the government may narrow the diesel excise tax cut in October. The excise tax of THB5 per litre has been waived for over 12 months, to keep retail diesel prices below THB30 per litre. Tanusak on Wednesday said that in October, the government plans to levy THB1.50 per litre. Opposition leader Abhisit Vejjajiva mentioned the possible levy during the budget bill scrutiny. However, Tanusak said that retail prices will unnecessarily rise beyond THB30 per litre due to the levy. He sent a message that the Oil Fund will be used to shoulder the differential. (The Nation) BBL in push for debit chip card Bangkok Bank is strongly promoting its chip-enhanced debit cards to consumers in terms of safety, and plans to increase the number of automated teller machines in a bid to persuade both existing and new customers to change from magnetic-stripe to chip cards. BBL is the only Thai bank to launch a secure debit card with EMV chip technology. Its so-called Be1st Smart card was introduced in 2010 to help prevent fraud arising from card skimming and cloned cards. EMV, which stands for Europay, MasterCard and Visa, is a global standard for cards embedded with integrated circuits. (The Nation) Settapong quells nerves over digital TV auction The September auction for digital TV licences on the 510-790-megahertz spectra will proceed as planned, says a key official of the National Broadcasting and Telecommunications Commission (NBTC). The confirmation came after the International Telecommunication Union (ITU) warned that Thailand could be at extreme risk of failing to comply with international frequency standards for mobile services, which in turn could result in wireless signal interference along the country's borders. The ITU has reserved the 700-MHz range for mobile broadband for technical harmonisation, with global compliance required from 2020. (Bangkok Post)

See import ant disclosu res at the end of this report 3

Economic Highlights

Thailand: Unified MPC cuts rate to 2.50% For the first time this year, the Bank of Thailand yesterday cut its benchmark interest rate by 25 basis points to 2.5%, acting to cushion against risk to domestic demand after weaker-than-expected 1Q economic growth. "Against the backdrop of continued financial stability concerns, the Monetary Policy Committee (MPC) thus voted unanimously to reduce the policy rate by 25 basis points from 2.75% to 2.5% per year," the MPC said in a release. Anemic domestic demand weighed on first-quarter gross domestic product (GDP) growth and could hamper overall economic momentum, particularly if there is a delay in the government's infrastructure investment expected to start later this year, said the MPC. (Bangkok Post) Myanmar : May Attract USD100bn in FDI by 2030, McKinsey s ays Myanmar may attract as much as $100 billion in foreign direct investment over the next two decades if it spends enough to achieve its economic growth potential, McKinsey Global Institute said in a report today. The former military regime’s gross domestic product could more than quadruple to USD200bn with an 8% annual growth rate, according to McKinsey, almost double the pace from 1990 to 2010. That may help lure USD170bn in capital inflows, it said, with FDI accounting for USD100bn more than twice as much as it attracted in the previous two decades. (The Nation) South Korea : Industrial Output +0.8% In April South Korea's industrial production was up 0.8 percent in April compared to the previous month, Statistics Korea said today. That beat forecasts for a flat reading following the 2.6% contraction in March. On a yearly basis, industrial production climbed 1.7% - blowing past forecasts for a decline of 0.6% after shedding 3.0% in the previous month. The index of all industry production was up 1.6% on month and 3.7% y-o-y in April, the bureau said. (RTT) BRIC: Brazil economy unexpectedly slows as prices h it consumers Brazil’s growth unexpectedly slowed in the first quarter, complicating government efforts to revive the economy as it battles inflation. Swap rates fell. The economy expanded 0.55% in the January-March period, the national statistics agency said. GDP increased less than the 0.9% median forecast of analysts polled by Bloomberg, the fifth straight quarter of slower-than-forecast growth. On an annualized basis, the expansion decelerated to 2.2%, down from 2.6% in the fourth quarter of 2012. (Bloomberg) Global: OECD forecasts global economy to recover nex t year The Organization for Economic Cooperation and Development forecasts global economic growth will accelerate in 2014 with both the US and Japan continuing to outpace the euro area. “The global economy is moving forward and it is doing so at multiple speeds,” OECD Chief Economist Pier Carlo Padoan said in its semi-annual Economic Outlook. Differing monetary and fiscal choices across the major developed economies are driving regional divergence with “each path carrying its own mix of risks,” he said. The OECD sees US GDP rising 1.9% this year and 2.8% in 2014, while Japan’s will increase 1.6% and 1.4%. The euro-area economy will shrink 0.6% this year before expanding 1.1% next, according to the report (Bloomberg) EU: German unemployment climbs four times forecast a mid crisis German unemployment rose more than four times as much as economists estimated in May as the euro area’s sovereign debt crisis and a long winter took their toll on Europe’s largest economy. The number of people out of work climbed a seasonally adjusted 21,000 to 2.96 million, the Federal Labor Agency said yesterday. That’s the fourth straight monthly gain. The adjusted jobless rate held at 6.9%, just above a two- decade low of 6.8%. (Bloomberg) EU: Inflation rate rose in May from lowest in 2.5 ye ars German inflation accelerated more than economists expected in May after falling to the lowest level since August 2010 the previous month. The inflation rate in Europe’s largest economy, calculated using a harmonized European Union method, jumped to 1.7% from 1.1% in April, the Federal Statistics Office said yesterday. Prices rose 0.3% on the month. The Bundesbank has forecast the German economy will expand 0.4% this year, outpacing euro-area peers. Inflation is seen averaging at 1.5% this year and 1.6% in 2014. (Bloomberg) UK: BOE targets June to complete review of banks’ ca pital raising The UK’s Prudential Regulation Authority is aiming to tell all lenders their individual share of a GBP25bncapital shortfall by the end of June, according to a senior bank supervisor. The watchdog has a “timely but not rushed process” to discuss with each firm in turn the steps they need to take to bolster their balance sheets, Sam Woods, a director at the PRA’s domestic banking division, said in an interview in London. The PRA, the unit of the Bank of England which took over responsibility for banking supervision from the Financial Services Authority last month, along with the Financial Policy Committee, ordered lenders to boost their capital by the end of the year. (Bloomberg)

See import ant disclosu res at the end of this report 4

Outperform

Current Target Upside/

Recc. Price Price Downside PE (x) Yield (%) Remarks

(Bt) (Bt) (%) 2013f 2013f

THAI Buy 31.50 42.60 35.2 14.8 2.5

Underperform

Current Target Upside/

Recc. Price Price Downside PE (x) Yield (%) Remarks

(Bt) (Bt) (%) 2013f 2013f

PTTGC Sell 75.00 82.10 9.5 10.0 3.5

TOP Neutral 66.00 69.10 4.7 10.8 3.7

SPALI Buy 20.20 15.50 -23.3 10.6 3.8

See import ant disclosu res at the end of this report 5

Diary of Events 7-May 8-May 9-May 10-May 11-May

US Data Arial 7pt. MY Data MY Results Second Chance Properties SIA Engineering OSIM International

US Data MY Data MY Results

US Data MBA Mortage Applications (May 4) MY Data Automobile COE Open Bid Cat A (May 9) Automobile COE Open Bid Cat B (May 9) Automobile COE Open Bid Cat C (May 9) MY Results Singapore Airlines Ltd ASL Marine Holdings Ellipsiz Ltd Sembcorp Marine United Overseas Bank

US Data Initial Jobless Claims (May 5) Continuing Claims (Apr 28) MY Data MY Results Wilmar International City Developments Hiap Hoe Singapore Telecommunications Vicom Ltd

US Data MY Data MY Results Sembcorp Industries Mewah International

14-May 15-May 16-May 17-May 18-May US Data MY Data MY Results SATS Ltd ComfortDelgro Corp

US Data MY Data Retail Sales Ex Auto (YoY) (Mar) Retail Sales (YoY) (Mar) Retail Sales (MoM) sa (Mar) MY Results Fragrance Group Global Premium Hotels First Resources Ltd Armstrong Industrial Olam International

US Data MBA Mortage Applications (May 11) MY Data MY Results

US Data Initial Jobless Claims (May 12) Continuing Claims (May 5) MY Data MY Results

US Data MY Data MY Results Tiger Airways

21-May 22-May 23-May 24-May 25-May US Data MY Data MY Results

US Data Existing Home Sales (Apr) Existing Home Sales MoM (Apr) MY Data MY Results Avago Technologies Ltd

US Data MBA Mortage Applications (May 18) New Home Sales (Apr) New Home Sales MoM (Apr) MY Data Automobile COR Open Bid Cat A (May 23) Automobile COR Open Bid Cat B (May 23) Automobile COR Open Bid Cat C (May 23) MY Results

US Data Initial Jobless Claims (May 12) Continuing Claims (May 5) MY Data Initial Jobless Claims (May 19) Continuing Claims (May12) MY Results Global Logistics Properties Ltd

US Data MY Data MY Results

29 28 27 23 22 29 28 27 23 22

1 BTS 303.8 10.2 82.8 10.1 1.1 BBL -322.9 21.3 -182.9 -243.6 206.0 INTUCH 9,848.9 SCC -773.4 INTUCH 35,106.5 SCC -6,456.0

2 INTUCH 270.4 282.6 127.3 -206.0 636.8 PTT -305.9 -14.2 12.5 109.0 727.6 PTT 2,961.4 KTB -676.7 DTAC 10,232.7 BANPU -3,162.6

3 SCC 153.7 -24.9 62.8 -93.1 -123.5 ADVANC -167.7 126.3 -82.5 -180.5 -231.8 CPN 2,154.0 BBL -606.0 ADVANC 8,605.1 LH -2,640.3

4 EGCO 86.4 19.9 5.9 15.0 2.5 SCB -147.7 -16.1 -87.0 -630.3 -68.3 BAY 2,074.8 CK -550.1 PTT 8,294.1 SIRI -1,416.3

5 LH 77.7 190.1 11.6 -26.3 -75.0 KTB -137.7 17.9 -75.4 -7.9 -419.4 PTTGC 1,953.6 TRUE -486.3 PTTEP 8,220.7 DEMCO -778.0

6 PTTGC 70.8 18.0 37.9 -59.4 -0.7 PTTEP -120.6 52.4 -64.3 -101.7 92.7 PTTEP 1,834.7 ADVANC -388.6 BAY 8,050.9 TRUE -707.6

7 THAI 63.3 16.2 59.2 64.2 155.6 KBANK -76.9 -1,162.2 -365.9 50.5 539.1 CPALL 1,587.4 BANPU -378.1 PTTGC 7,832.2 CK -685.4

8 SAMART 44.6 -21.6 -9.2 -0.2 -0.3 TOP -74.4 34.6 41.7 129.3 178.0 KBANK 1,561.0 SPCG -330.1 KBANK 5,499.7 UV -496.8

9 HMPRO 40.8 20.4 -3.1 0.1 11.3 AOT -71.8 14.0 -113.2 -96.5 -20.3 MAKRO 1,259.7 BJC -178.2 TMB 3,882.3 HMPRO -429.6

10 BIGC 39.6 2.6 27.4 72.9 26.8 BAY -68.9 -115.5 -26.4 280.8 65.7 THAI 1,026.1 NOBLE -164.4 TOP 3,478.5 ASP -356.5

11 TRUE 38.0 105.3 46.8 13.2 -44.6 BEC -63.0 14.6 -12.0 -131.8 310.3 THCOM 799.8 HMPRO -135.1 CPALL 3,244.4 RML -343.3

12 JAS 37.4 -42.7 -11.8 -13.3 26.8 CPF -58.5 -17.6 -52.3 -18.2 2.7 BEC 689.6 TCAP -133.6 BBL 3,220.8 MINT-W4 -238.0

13 GLAND 35.1 56.8 0.0 0.0 0.1 MALEE -51.1 -8.3 -23.5 -14.3 -3.9 BTS 623.3 MALEE -114.9 BIGC 3,016.3 STPI -213.9

14 GLOW 33.8 51.8 1.9 -27.0 2.4 AAV -47.9 -29.3 8.6 -165.2 -51.2 MINT 590.2 SVI -111.6 MAKRO 2,989.0 TRC -197.3

15 THCOM 28.5 3.0 0.8 12.0 10.8 THRE -45.2 34.4 0.7 39.5 41.2 TMB 577.0 MFEC -108.7 TCAP 2,836.6 LRH -193.8

16 MINT 26.2 31.6 31.5 -36.2 -38.6 PS -44.8 5.1 7.4 -1.5 54.4 TOP 560.5 MCOT -105.5 CPF 2,621.5 IRPC -190.0

17 AP 23.7 5.5 -85.5 -46.0 25.9 BGH -44.5 11.9 -21.4 -96.0 6.7 TUF 521.9 CFRESH -101.8 CPN 2,139.4 AMATA -159.2

18 MFEC 22.4 0.2 1.7 -1.5 -25.8 MAKRO -32.2 5.8 17.7 370.6 -0.1 AOT 479.1 ROBINS -95.1 TUF 2,107.2 NOBLE -158.9

19 SPALI 20.3 -15.1 34.8 52.9 -7.0 TUF -31.6 13.8 51.6 45.1 98.7 DTAC 423.1 SCB -95.0 THAI 2,057.6 GUNKUL -150.8

20 UNIQ 20.1 29.8 -4.4 3.2 4.0 TCAP -31.4 2.1 -74.0 21.0 -498.9 BIGC 394.9 CPF -75.6 SPALI 2,051.4 TWFP -128.7

% % of % of

Turn. paidup paidup

1 BTS 18.20 1 TISCO-P 66.16 65.86

2 BLAND 2.44 2 BBL 31.02 29.99

3 TMB 12.48 3 TISCO-T1 29.76 65.86

4 TRUE 3.47 4 KBANK 29.63 28.50

5 LH 31.62 5 SPALI 22.21 17.94

6 GJS 1.21 6 GOLD-W1 21.50 14.87

7 JAS 4.61 7 LPN 21.42 21.73

8 N-PARK 0.70 8 E-W1 19.48 22.27

9 KTB 6.35 9 THRE 18.95 15.50

10 AAV 10.58 10 INTUCH 18.47 5.41

11 IRPC 15.86 11 LH 17.91 21.18

12 INTUCH 16.54 12 SPCG-W1 17.82 13.31

13 GLAND 6.75 13 TWFP 16.55 24.77

14 HMPRO 8.05 14 DTAC 15.70 13.33

15 BAY 21.27 15 TCAP 15.57 12.60

16 THRE 15.25 16 BAY 15.27 13.89

17 MINT 17.66 17 AP 15.19 12.92

18 AP 15.60 18 TISCO 14.52 13.69

19 GSTEL 2.58 19 THIP 14.50 12.64

20 CPF 15.63 20 LALIN 14.02 13.53

Source : SET.OR.TH

2,845,098

7,942,500

240,600

2,530,200

6,696,238 6,936,838

2,478,252

8,182,7625,513,930

3,903,508 2,963,430

7,363,252

79,500

4,920,752 2,442,500

7,047,1324,516,932

8,022,000 8,101,500

347,800 8,235,200 8,583,000 -7,887,400

3,265,000 5,292,800 8,557,800

1,277,816,397 -1,986,732

-2,027,800

2,668,832

1,573,716 2,354,634 9,506,055

2,367,811,000 371,848,972 315,525,949

2,898,300

367,964,647

198,936,632 161,065,653

927,688,203 -6,455,638

111,592,900 825,000,000

6,866,938 940,078

105,703,426 99,645,251

1,159,700

115,627,500 -1,927,615

-5,102,7005,815,200 6,527,700

5,456,015

4,743,700 1,845,400

1,764,200 3,691,815

712,500

6,589,100

8,000,000

727,878,228

6,074,143,747

434,542,679

1,011,300

843,803,210

2,859,920,138

2,123,251,472 10,025,921,523 1,795,544,729

49,892,700 37,278,800 279,999,581

3,512,494,860

3,206,420,305

665,591,203 544,461,149

592,298,372 173,363,101

1,475,698,768

347,000,000

316,099,936 320,609,239

67,580,742 77,281,246

89,952,203 74,970,598

9,163,300

12,600,000 1,220,000

11,206,000 4,375,000

20,139,780 6,433,620

13,820,000 11,380,000

15,581,000 6,831,000 418,421,323

13,286,700 6,853,080

12,253,600 -6,073,000

9,457,300 5,451,600 14,908,900 4,005,700

3,090,300

2,393,260,193

-11,834,200

1,716,553,249

37,075,711

709,071,945

307,949,569 381,274,500

3,415,200 682,155,834 13,044,400 9,629,200 22,673,600

572,486,791 2,250,900

11,032,578 22,300

592,079,155 17,617,100 37,485,100

8,354,000 20,188,200 28,542,200

NetBuy Sell Total

1,908,842,894

44,079,200 8,523,100 22,400 22,300 52,602,300 35,556,100

19,868,000

33,858

2-Jan-13

Net Buy Net Sell Net Buy Net Sell

2 Jan- 29 May 131-29 May 13

30 May 2013

May 13 May 13

Total Volume Shares

(Last)

NVDR Shrs. Paid up CapitalNVDR Shrs.

29-May-13

Most Active Volume (shares) NVDR Shares to Total Paid-up Shares(%)

NET BUY NET SELL Month to Date Year to Date

Most Active Values (Btmn)

THAI NVDR : Top Ranking

See important disclosures at the end of this report Powered by Enhanced Datasystems’ EFATM Platform 1

Company Update , 29 May 2013

BTS Group Holdings (BTS TB) Trading Buy (Maintained)

Industrial - Transportation Target Price: THB10.15Market Cap: US D3,210m Price : THB8.60

A Smooth Ride Ahead

Macro ��

Risks ��

Growth ��

Value ��

90

103

117

130

143

157

170

4.1

5.1

6.1

7.1

8.1

9.1

10.1

BTS Group Holdings (BTS TB)

Price Close Relative to Stock Exchange of Thailand Index (RHS)

100

200

300

400

500

600

700

800

Ma

y-1

2

Jul-1

2

Sep

-12

No

v-12

Jan-

13

Apr

-13

Vol

m

Source: Bloomberg

Avg Turnover (THB/USD) 1,063m/36.2m

Cons. Upside (%) 20.7

Upside (%) 20.1

52-wk Price low/high (THB) 4.63 - 9.40

Free float (%) 45

Shareholders (%)

Mr. Keeree Kanjanapas Group 49.2

Bangkok Bank PLC 5.2

nt

Thailand Research Team +66 (0) 2862 9999 ext 2030

Forecasts and Valuations Mar-11 Mar-12 Mar-13 Mar-1 4F Mar-15F

Total turnover (THBm) 6,829 9,252 6,714 7,715 8,935

Reported net profit (THBm) 359 2,278 2,488 2,234 2,610

Recurring net profit (THBm) 359 989 1,709 2,234 2,610

Recurring net profit growth (%) na 175.9 72.8 30.7 16.9

Core EPS (THB) 0.04 0.10 0.16 0.20 0.23

DPS (THB) 0.06 0.30 0.38 0.54 0.63

Dividend Yield (%) 0.7 3.6 4.5 6.3 7.4

Core P/E (x) 228 83 52 42 36

Return on average equity (%) 2.1 6.5 6.1 4.8 5.5

P/B (x) 2.35 2.31 2.02 2.01 1.94

P/CF (x) 57 46 175 33 28

EV/EBITDA (x) 32.2 19.5 21.4 9.0 8.3

Net debt to equity (%) 55.7 66.9 17.3 net cash net cash

Our vs consensus EPS (%) 0.2 (3.3)

Source: Company data, RHB Estimates

BTS’ commitment to dis tribute at least T HB21bn in dividend s (which is a yield of >6%) over the next three years should be an attractive value proposition for investors, even if some may switch t o BTSGIF for a direct exposure to the mass transit business. We maintain a TRADING BUY call on the stock, with an unchanged SOP-based T P of THB10.15.

♦ Progressive dividend strategy. Instead of distributing the proceeds

from the disposal of its net fareboxes to the BTS Growth Infrastructure Fund (BTSGIF) as one-off special dividend, BTS Group Holdings (BTS) has opted for a progressive policy in which it will pay at least THB21bn in dividends over the next three years to shareholders. It has committed to pay total dividends of at least THB6bn, THB7bn and THB8bn for FY14, FY15 and FY16 respectively. The payouts will be funded by the gains from the disposal of net fareboxes as well as its annual recurring profit. We view the strategy positively as it enables BTS to reward shareholders while still being able to conserve its cash for future expansion.

♦ Prudent capital management. BTS netted proceeds of THB61.4bn from the setting-up of BTSGIF, of which THB20.8bn has been used to acquire a 33.3% stake in the latter, THB9.5bn was allocated to repay borrowings and THB31.1bn was allocated for investments to expand its mass transit lines in the future. The equity investment for the new lines is estimated at around THB19.4bn–THB22.9bn. Given that the tendering process for the new lines is expected to start in 3Q/4QCY13, it intends to put the excess cash into investments that offer capital preservation and flexible liquidity, as part of a prudent management strategy for its funds. The company is in the midst of selecting a fund to manage the investments on its behalf, from which it targets c.THB1.5bn in total returns over a period of 1.5 years.

♦ Maintain TRADING BUY . We maintain our forecasts and TRADING BUY call, with an unchanged SOP-based TP of THB10.15. While BTS might have less direct exposure to the mass transit business, we believe its progressive dividend policy coupled with future growth from its other businesses present an attractive value proposition to investors.

BTS Group Holdings (BTS TB) 29 May 2013

See import ant disclosures at the end of this report 2

Figure 1: SOP valuation for BTS THB m Remarks

BTSGIF 20,426.2 5% target yield on FY14 DPU

O&M 13,439.2 DCF

VGI 26,622.0 70% stake in VGI (based on current price)

Property 22,600.0 2x BV

Minus net debt/ plus net cash 29,146.9

Total 111,934.3

Share base (m) 11,023.8

FV Per share (THB) 10.15 Source: RHB Estimates

BTS Group Holdings (BTS TB) 29 May 2013

See import ant disclosures at the end of this report 3

Financial Exhibits

Profit & Loss (THBm) Mar-11 Mar-12 Mar-13 Mar-14F Mar -15F

Total turnover 6,829 9,252 6,714 7,715 8,935

Cost of sales (3,357) (4,020) (2,882) (2,867) (3,329)

Gross profit 3,472 5,232 3,831 4,848 5,605

Gen & admin expenses (1,034) (1,212) (1,048) (1,157) (1,385)

Selling expenses (250) (177) (223) (177) (210)

Other operating costs (171) - (34) (50) (30)

Operating profit 2,017 3,843 2,525 3,464 3,980

Operating EBITDA 3,205 5,346 4,289 4,764 5,280

Depreciation of fixed assets (1,187) (1,503) (1,763) (1,300) (1,300)

Operating EBIT 2,017 3,843 2,525 3,464 3,980

Net income from investments 1 (2) 3 454 499

Other recurring income 1,895

Interest expense (1,602) (1,432) (1,248) (850) (850)

Pre-tax profit 417 2,408 3,175 3,067 3,630

Taxation - - (439) (552) (653)

Minority interests (58) (130) (248) (281) (366)

Profit after tax & minorities 359 2,278 2,488 2,234 2,610

Reported net profit 359 2,278 2,488 2,234 2,610

Recurring net profit 359 989 1,709 2,234 2,610

Source: Company data, RHB Estimates

Cash flow (THBm) Mar-11 Mar-12 Mar-13 Mar-14F Mar-15F

Operating profit 2,017 3,843 2,525 3,464 3,980

Depreciation & amortisation 1,187 1,503 1,763 1,300 1,300

Change in working capital 2,626 4,367 5,242 6,651 7,292

Other operating cash flow (5,899) (8,901) (9,620) (9,048) (9,686)

Operating cash flow (69) 813 (90) 2,367 2,886

Interest received (29) (40) (59) (42) (45)

Interest paid 1,487 983 903 1,216 1,216

Dividends received - (0) (2) - -

Tax paid 32 24 (249) (679) (713)

Cash flow from operations 1,422 1,779 503 2,862 3,344

Capex (4,049) (1,856) (1,180) (1,273) (1,301)

Other new investments 3,195 2,648 878 34,160 1,100

Other investing cash flow (20,792) (4,857) (623) (502) (462)

Cash flow from investing activities (21,646) (4,064) (925) 32,385 (663)

Dividends paid (718) (2,647) (3,159) (1,049) (1,237)

Proceeds from issue of shares 22,838 - 6 - -

Increase in debt 2,432 5,949 (3,344) 200 (100)

Other financing cash flow (1,851) (1,510) (1,139) (1,392) (1,851)

Cash flow from financing activities 22,702 1,792 (7,637) (2,241) (3,188)

Cash at beginning of period - 1,825 1,333 3,513 23,862

Total cash generated 2,477 (492) (8,058) 33,006 (506)

Implied cash at end of period 2,477 1,333 (6,725) 36,519 23,356

Source: Company data, RHB Estimates

BTS Group Holdings (BTS TB) 29 May 2013

See import ant disclosures at the end of this report 4

Financial Exhibits

Balance Sheet (THBm) Mar-11 Mar-12 Mar-13 Mar-14F Mar -15F

Total cash and equivalents 1,825 1,333 3,513 23,862 23,104

Accounts receivable 640 1,107 946 1,503 1,728

Other current assets 3,559 5,428 47,918 5,825 5,914

Total current assets 6,024 7,868 52,377 31,190 30,746

Total investments 2,504 2,468 4,275 21,058 21,146

Tangible fixed assets 7,971 8,716 9,591 9,974 12,221

Intangible assets 44,610 45,313 160 3,214 3,198

Total other assets 2,593 2,525 2,796 2,830 2,840

Total non-current assets 57,678 59,021 16,821 37,075 39,405

Total assets 63,703 66,889 69,198 68,266 70,151

Short-term debt 652 5,021 5,163 3,835 3,129

Accounts payable 1,170 1,452 1,862 1,817 2,088

Other current liabilities 1,840 1,865 4,680 4,807 5,641

Total current liabilities 3,662 8,338 11,704 10,459 10,859

Total long-term debt 13,692 12,378 6,798 6,800 6,600

Other liabilities 8,840 9,241 1,873 2,091 2,017

Total non-current liabilities 22,531 21,619 8,671 8,891 8,617

Total liabilities 26,193 29,957 20,375 19,350 19,475

Share capital 35,769 36,600 44,427 44,427 44,427

Retained earnings reserve (1,476) (2,033) (2,756) 1,819 2,476

Other reserves 482 722 5,249 769 1,871

Shareholders' equity 34,775 35,290 46,920 47,014 48,773

Minority interests 2,734 1,642 1,902 1,902 1,902

Other equity - - (0) (0) (0)

Total equity 37,509 36,932 48,823 48,916 50,676

Total liabilities & equity 63,703 66,889 69,198 68,266 70,151

Source: Company data, RHB Estimates

Key Ratios (THB) Mar-11 Mar-12 Mar-13 Mar-14F Mar-15F

Revenue growth (%) 0.0 35.5 (27.4) 14.9 15.8

Operating profit growth (%) 0.0 90.5 (34.3) 37.1 14.9

Net profit growth (%) 0.0 535.5 9.2 (10.2) 16.9

EPS growth (%) 0.0 535.5 1.2 (16.4) 16.9

Bv per share growth (%) 0.0 1.5 14.8 0.2 3.7

Operating margin (%) 29.5 41.5 37.6 44.9 44.5

Net profit margin (%) 5.2 24.6 37.1 29.0 29.2

Return on average assets (%) 1.1 3.5 3.7 3.2 3.8

Return on average equity (%) 2.1 6.5 6.1 4.8 5.5

Net debt to equity (%) 55.7 66.9 17.3 (27.0) (26.4)

DPS 0.06 0.30 0.38 0.54 0.63

Recurrent cash flow per share 0.15 0.18 0.05 0.26 0.30

Source: Company data, RHB Estimates

BTS Group Holdings (BTS TB) 29 May 2013

See import ant disclosures at the end of this report 5

SWOT Analysis

• Solid track record

• Competitive advantage against other players

• Rising competition in its media business

• Regulatory risks relating to its concession business

• Participating in future mass transit expansion

• Expansion in the media business through VGI Global

• Less direct exposure to the mass transit business after the establishment of BTSGIF

-200%

0%

200%

400%

600%

800%

1,000%

1,200%

1,400%

1,600%

1,800%

0

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40

60

80

100

120

140

160

180

200

Jan-

11

Jan-

12

Jan-

13

Jan-

14

Jan-

15

P/E (x) vs EPS growth

P/E (x) (lhs) EPS growth (rhs)

0.0%

1.2%

2.3%

3.5%

4.7%

5.8%

7.0%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Jan-

11

Jan-

12

Jan-

13

Jan-

14

Jan-

15

P/BV (x) vs ROAE

P/B (x) (lhs) Return on average equity (rhs)

Source: Company data, RHB Estimates Source: Company data, RHB Estimates

Company Profile BTS Group, via its majority-owned subsidiary, is the concessionaire for the core Silom and Sukhumvit Lines in Bangkok’s rail mass transit system known as BTS SkyTrain. It is also the largest out-of-home media company in Thailand. The Group holds a 33.33% stake in BTSGIF and a ~70% stake in VGI Global Media

BTS Group Holdings (BTS TB) 29 May 2013

See import ant disclosures at the end of this report 6

Recommendation Chart

0

1

2

3

4

5

6

7

8

9

10

May-08 Sep-09 Dec-10 Mar-12

Price Close

NR

7.5

9.3

10.2

Recommendations & Target Price

Buy Neutral Sell Trading Buy Take Profit Not Rated

Source: RHB Estimates, Bloomberg

Date Recommendation Target Price Price

2013-05-28 Trading Buy 10.2 8.5

2013-04-29 Trading Buy 10.2 9.1

2013-02-14 Buy 9.3 8.2

2012-11-13 Buy 7.5 6.3

Source : RHB Estimates, Bloomberg

See important disclosures at the end of this report Powered by Enhanced Datasystems’ EFATM

Platform 1

Sector News Flash, 29 May 2013

Banks Overweight (Maintained)

No Sweat From Policy Rate Cut

Macro

2

Risks

1

Growth

2

Value

2

Thai banks’ loans-to-deposit ratios

Title:

Source:

Please fill in the values above to have them entered in your report

86.9%

91.5%93.3%

94.9% 95.7% 96.3%98.2%

119.2%

BBL TMB KTB KBANK SECTOR SCB TCAP BAY

Source: Companies and RHB estimates

Thai banks’ CASA and fixed deposit percentage composition

Title:

Source:

Please fill in the values above to have them entered in your report

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

KK TCAP SCB BAY KTB BBL KBANK

CASA Fixed

Source: Companies and RHB estimates

Keith Wee 603 9207 7638

keith.wee@rhbgroup.com

P/E (x) P/B (x) Yield (%)

Dec-13F Dec-13F Dec-13F

Bangkok Bank THB208 THB290 10.4 1.3 3.8 BUY

Bank of Ayudhya THB35 THB41 11.2 1.7 - BUY

Kasikornbank THB204 THB254 11.1 2.3 2.7 BUY

Kiatnakin Bank THB63 THB79 10.6 1.4 - BUY

Krung Thai Bank THB22 THB33 9.4 1.5 3.7 BUY

Siam Commercial Bank THB182 THB222 12.5 2.5 3.2 BUY

Thanachart Capital PCL THB48 THB54 9.2 1.2 - BUY

TISCO Financial Group PCL THB53 THB55 9.6 1.8 - NEUTRAL

TMB Bank PCL THB3 THB3 16.3 2.0 - BUY

Company Name Price Target Rating

As expected, after keeping the policy rate steady over the previous four meetings, the Bank of Thailand (BoT) trimmed it by 25 bps to 2.50% yesterday. The policy rate has dropped by a cumulative 100bps since Oct 2011. The rationale for the decision was: i) the weaker-than-expected global economic recovery, ii) tepid domestic demand growth in 1Q13, and iii) it was a tool to moderate the strong appreciation of the baht from persistent capital inflows. Pricing power and loan diversification mitigates downside

pressure. Although NIMs will certainly be pressured from the latest

25bps cut in the policy rate, we believe that the bigger banks’ diversified higher-yielding loan classes will help to mitigate any downside risks. This, coupled with the relatively high system loans-to-deposit ratio will ensure that pricing competition on loans yields should be more rationale. This was reflected in the last interest rate cut back in Oct 2012 when banks lowered their minimum lending rates (MLR) by 13bps vs the 25bps cut in the policy rate to 2.75%. The MLR have only declined by 25bps from 7.25% in Oct 2011 to the current 7.00%, despite a much larger 75bps cut in policy rates over the same period. We are still projecting the sector’s earnings to increase by 17% (in FY13) given its loans growth of 12%, fee income growth of 16%, opex growth of 15% and provision and corporate tax cuts ranging from 23% to 26%.

Smaller banks with high HP portfolio may benefit. Theoretically,

banks with a higher fixed-rate hire purchase (HP) loan composition and a higher proportion of fixed deposits should be net beneficiaries of a declining interest rate environment. TCAP and KK could find themselves at an advantage, assuming time deposits re-prices down by the same quantum as policy rate cuts. As such, banks which are dominant HP lenders could see a mild 2%-3% uplift in earnings for every 25bps cut in interest rates.

Larger banks to focus on profitable loan segments and non-interest income. During the last policy rate cut of 25bps in Oct 2012, the large

banks’ average sequential NIMs dipped by 9bps. However, as a result of relatively strong loans growth (in excess of 18% y-o-y) for the likes of SCB and robust non-interest income growth averaging 24.3% for the four large banks (BBL, SCB, KTB, KBANK), total operating income growth for the latter four remained at a solid 16.5% in 1QFY13.

Maintain Overweight, accumulate on weakness. As such, we view the

recent 3%-9% sell-off in Thai banking stocks over the past month on anticipation of the announced rate cut as an opportunity to accumulate on weakness. KTB’s share price declined the most at 9%, while share prices of the likes of SCB, BBL and KBANK declined an average of 4%. Our top picks for the sector are still KTB, TMB and KK.

, dictumst. Mauris vitae leo purus, nec feugiat dui.

Banks 29 May 2013

See important disclosures at the end of this report 2

Pricing power and loan diversification mitigates downside pressure.

Although NIMs will certainly be pressured from the latest 25bpps cut in policy rate, we believe that the diversification in to higher yielding loan classes by the bigger banks will help to mitigate the downside risk from the latest interest rate cut. This coupled with the relatively high system loans to deposit ratio will ensure that pricing competition on loans yields should be more rationale. This was reflected in the last interest rate cut back in October 2013 when banks lowered their minimum lending rates (MLR) by a lower 13bps vs the 25bps cut in policy rate to 2.75%. In totality, the MLR has only declined by 25bps from 7.25% in October 2011 to the current 7.00% despite a much larger 75bps cut in policy rates over the same period. Average NIMs for banks under our coverage witnessed a relatively well contained 25bps compression over the past 18 months despite the a 75bps cut in policy rates and lumpy increase in deposit protection and financial institutions development fund (FIDF) fees that caused an overall spike in the cost of funds of banks in early 2011.

Figure 1: Policy rate vs NIMs trend

Title:

Source:

Please fill in the values above to have them entered in your report

2.00%

2.20%

2.40%

2.60%

2.80%

3.00%

3.20%

3.40%

3.60%

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13

Policy rate NIMs

Source: BoT and companies

Figure 2: Policy rate trend vs minimum lending rate

Interest Rates at end-period Jun/12 Jul/12 Aug/12 Sep/12 Oct/12 Nov/12 Dec/12 Jan/13

Policy Rate 3.00% 3.00% 3.00% 3.00% 2.75% 2.75% 2.75% 2.75%

Fixed Depo of Commercial Banks: 3-month 1.80% 1.80% 1.80% 1.80% 1.65% 1.60% 1.60% 1.60%

MLR of Commercial Banks 7.13% 7.13% 7.13% 7.13% 7.00% 7.00% 7.00% 7.00%

Interest Spread (MLR - 3M FD) 5.33% 5.33% 5.33% 5.33% 5.35% 5.40% 5.40% 5.40%

MLR (Minimum Lending Rate) 7.13% 7.13% 7.13% 7.13% 7.00% 7.00% 7.00% 7.00%

Source: BoT

Banks 29 May 2013

See important disclosures at the end of this report 3

Figure 3: Banks’ quarterly NIMs

1QCY11 2QCY11 3QCY11 4QCY11 1QCY12 2QCY12 3QCY12 4QCY12 1QCY13

BBL 2.55% 2.76% 2.82% 2.81% 2.60% 2.57% 2.55% 2.41% 2.44%

SCB 3.09% 3.28% 3.33% 3.14% 3.15% 3.17% 3.23% 3.12% 3.11%

KTB 2.60% 2.76% 2.86% 2.93% 2.84% 2.76% 2.69% 2.72% 2.61%

KBANK 3.46% 3.56% 3.65% 3.68% 3.59% 3.53% 3.55% 3.53% 3.49%

KK 4.29% 4.04% 3.75% 3.33% 2.92% 3.61% 3.80% 3.90% 3.90%

BAY 4.44% 4.39% 4.43% 4.09% 4.07% 4.22% 4.31% 4.30% 4.28%

TISCO 4.12% 3.91% 3.45% 3.76% 2.77% 3.00% 2.83% 2.80% 2.78%

TCAP 2.97% 3.02% 2.88% 2.58% 2.57% 2.78% 2.49% 2.46% 2.54%

Average 3.44% 3.47% 3.40% 3.29% 3.06% 3.21% 3.18% 3.16% 3.14%

Average for large banks 2.93% 3.09% 3.17% 3.14% 3.05% 3.01% 3.01% 2.95% 2.91%

Average for Mid-to-small banks 3.96% 3.84% 3.63% 3.44% 3.08% 3.40% 3.36% 3.37% 3.38% Source: Companies

6

RHB Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage Disclosure & Disclaimer All research is based on material compiled from data considered to be reliable at the time of writing, but RHB does not make any representation or warranty, express or implied, as to its accuracy, completeness or correctness. No part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or otherwise. This report is general in nature and has been prepared for information purposes only. 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Further, RHB, its affiliates and related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies), as well as solicit such investment, advisory or other services from any entity mentioned in this research report. 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RHBSHK, RHBIB and/or other affiliates may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from the subject company.

7

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